The Economy and Living Standards
Debate between Stewart Hosie and Ann McKechin(10 years, 6 months ago)
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Stewart Hosie
That is because we would be. Although I welcome the limited growth that we have had, the actions taken by this Government since the last election stifled and strangled the recovery for some years, and that is the underlying problem with their plan.
Let me take Scotland as an example. What the Government are proposing—this was before the Budget—is an 11% fiscal expenditure cut, a 27% cut in capital and a real terms 9.9% cut in the overall budget. This year’s Budget made that position worse, and that applies to spending Departments throughout the UK. Nothing in the Queen’s Speech changes that. Nor does it change the fact that the Chancellor told us that for 2013-14, the current account deficit would be down to 2.3% of GDP, borrowing would be reduced to £60 billion and the net debt would be at 70% of GDP. He was forced to tell us this year that the current account deficit was higher, borrowing was actually £95.5 billion and the net debt was 75% of GDP. The short-term metrics were wrong.
What about the big targets the Chancellor set for himself? They were that the debt would begin to fall as a share of GDP by this year, that the current account would be in balance next year and that the same year borrowing would be down to £20 billion. Presumably, that is what the Prime Minister meant by financial security. Of course, as we know—nothing in the Queen’s Speech changes this—the debt will not fall until 2016-17, two years late. The current account will not be back in the black until 2017-18, two years late. Public sector net borrowing in 2015-16 will not be £20 billion but £68 billion, three and a half times higher.
Although the limited recovery we have seen in the past year is of course to be welcomed—this directly answers the question asked by the hon. Member for Suffolk Coastal (Dr Coffey)—not a single one of the Chancellor’s key targets has been met and his actions, as this is an austerity Government, stifled growth and delayed recovery year on year. No amount of convoluted formulations or warm words about long-term economic plans can change that.
What are the Government planning? It is there in black and white in the Red Book, on page 20 for anybody who wants to have a look. There will be a discretionary consolidation—that is cuts, and tax rises—next year to the tune of £126 billion. That is £2,000 per person in tax rises and cuts. That is what they are planning and that is what they have signed up to.
Ann McKechin (Glasgow North) (Lab)
I am interested in the hon. Gentleman’s comments on achieving growth. Presumably the skill base would need to be increased, so I take it that he agrees that cutting the college budget by £50 million would not be the way to achieve sustainable growth.
Stewart Hosie
When it comes to improving education, having a record number of Scots in full-time college places is excellent; having 25,000 to 26,000 Scots starting apprenticeships every year is first class; having 32,000 Scots start university this year is the way to proceed; and having all the school exam results improve in the way they have is probably a really good start. If the hon. Lady is saying that we can do more and can do better, of course we can—any Government can—but let us not talk down success, particularly when we are trying to hold this Government to account.
The point that I was making is that what we have is not a long-term economic plan. It is certainly not sustainable and it is certainly not a recipe for the growth the economy needs. It is just more Liberal and Tory austerity. It is the same plan that has seen this Government fail on their short-term and long-term targets so far and that will fail again. If it is about financial security, there is no evidence that it will succeed. If it is about growth, the Government are not even talking about that. If it is about delivering on the needs and ambitions of the people, it is woefully inadequate. As the discretionary consolidation laid out in black and white in the Red Book is predicated on a ratio of cuts to tax rises of 4:1, we do not have a long-term economic plan but a Tory Government who seem determined once again to try to balance the books on the backs of the poor. That is not a long-term economic plan; that is a disgrace.
Scotland Bill
Debate between Stewart Hosie and Ann McKechin(13 years, 6 months ago)
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Stewart Hosie
Notwithstanding the hon. Lady’s questions, do I take it from her answers that she sees some potential to remove the obstacle that Labour in Scotland found to minimum pricing? The Labour party’s argument was that an increase in only the retail price went straight to the UK Exchequer and did not benefit the economy generally or the Government in tackling some of the consequences of drinking cheap alcohol.
Ann McKechin
The hon. Gentleman is right to raise the serious problem of alcohol consumption in Scotland. As the Labour group in Holyrood pointed out, simply raising the price and allowing supermarkets to retain the surplus—I think that that was the Scottish Government’s first plan—was neither popular nor logical.
However, it is important to note that excise duty is now subject to an escalator above inflation. The Labour Government introduced it before the general election so that excise duty increases above inflation. Although, following the recession, as might have been anticipated, consumption in England dropped, that has not happened in Scotland to the same extent. There is a significant difference between consumption in Scotland and average consumption in England, despite the identical price and range of products.
Price sensitivity does not seem to apply in Scotland to the same extent as it does in England. That suggests that cultural and social issues are predominantly behind the problem. I do not derive any satisfaction from that. It would be much easier if we could say that a simple price escalation would lead to a reduction in consumption. However, the evidence to date has not shown that that would happen. Indeed, the medical evidence shows that the unit cost would have to be considerably higher than that in the Scottish Government’s proposals to make any impact. Obviously, that would have an effect on the drinks industry, particularly given that much of it is located in Scotland.
The subject is serious. The Scottish Government already have a range of levers at their disposal. The one for excise duty is exceptionally complex and I do not think that the argument for it has been made. Certainly, more needs to be done, but it needs to be based on hard evidence. We also need to realise that some of the things that we would like to do and that we think could work might not be sufficiently strong to make an impact. We might have to reconsider our proposals.
I appreciate that the Scottish Government have begun re-examining the issue because I think that they recognise that providing money to supermarkets was not the way forward. However, the issue is much wider and requires several different measures. The power to ban drink discounting, which the Labour group supported, is already on the statute book in Holyrood. That has still to go ahead. I therefore hope that the Scottish Government will enforce the legislation that they already have on the statute book.
Ann McKechin
The hon. Gentleman must recognise that the cost of alcohol has increased by slightly more than inflation over the past 20 or 30 years, when, of course, the increase in incomes has been much greater. The Government’s ability to control that gap is limited.
The other problem is that the total price of alcohol is, to a large extent, made up of different forms of tax. When we increase taxation to more than a certain level, we find that there is an increase in black market sales, as we found when we increased taxation on cigarettes. I do not discount the fact that price can have a bearing on consumption, but the evidence to date in Scotland presents us with a much more complex problem, much of which is about cultural and social values. They are the only things that can explain the difference in consumption north and south of the border. The regimes of alcohol selling are more or less the same, but there is increased drinking at home rather than in public houses. The problem is complex, and a range of measures must be put in place to deal with it. My Labour colleagues certainly want to make changes that will make an impact, and they are prepared to have a serious debate.
Stewart Hosie
Finally on that point, and for the sake of completeness, I am sure the shadow Secretary of State would want to confirm that all 17 of Scotland’s public health directors supported minimum pricing, as did the four UK chief medical officers, the British Medical Association, the royal colleges, the Association of Chief Police Officers and many others, including Tennent’s, Molson Coors and Tesco. They saw minimum pricing as an important part of the solution to the problems in Scotland.
Ann McKechin
The supermarkets might well have supported minimum pricing because they would receive a good degree of financial benefit from it. However, some medical experts said that on the evidence, the price per unit would have to be a great deal higher than that proposed by the Scottish Government to have an impact. As I said, although the increase in the excise duty escalator, which the UK Labour Government introduced, has had an impact south of the border in reducing consumption, it has not had the same impact in Scotland. Price sensitivity seems to be different north and south of the border, and there are different patterns of consumption. The focus must be on cultural and social values as much as on simple economic values.
On that basis, there are considerable complexities in any such proposals. The Government’s proposals would have an adverse impact on the drinks industry, which has a substantial bearing on the Scottish economy, but the argument for them has not been made.
Scotland Bill
Debate between Stewart Hosie and Ann McKechin(13 years, 9 months ago)
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Iain Stewart
There will be huge consequences, some foreseen, but others unforeseen. We would need to undertake a huge amount of research to work out how to begin to disaggregate what has been a unitary UK tax system. I am not saying that it is impossible, or that it is something that we should not look at in future, but for the purposes of the Bill, I do not think that it is necessary, because clause 24 makes provision to look at devolving additional tax powers in future.
I am not going to say anything more at this point, because I want to deal in detail with other measures when we come on to the relevant clauses. Scottish National party Members have made a point about air passenger duty and landfill tax. I am perfectly content that measures are being negotiated at European level and elsewhere. Until they are resolved, it would be premature to include the devolution of those taxes in the Bill. I accept that the Calman view was that those matters should be devolved in the fullness of time, and I support that, but it is not necessary to include it at this point. I am therefore afraid that I cannot support the amendments if they are pressed to a vote.
Ann McKechin (Glasgow North) (Lab)
What a difference a week makes, as we continue our scrutiny of the Bill after our sitting last Monday. On Thursday, we witnessed a plenary debate in the Chamber at Holyrood on the recommendations in the report on the legislative consent motion. At the conclusion of the debate, there was a vote, and we witnessed a remarkable about-turn, as the Scottish National party supported the motion recommended in the majority report. After two years of sniping on the sidelines, it has joined the three other major parties in Scotland to support the Bill, and I genuinely welcome that.
Who is surprised at the pattern that has emerged yet again? This is a party that did not join the constitutional convention, but supported the devolution referendum. It came into power four years ago, promising that its top aim above all others was a referendum on independence, which was then dropped. The interesting allegations in Wikipedia about the First Minister’s comments on the party’s real aims, rather than all-out independence, add to the mix the overwhelming conclusion that it can talk about independence as much as it wants, but the SNP has never been on the true side of the people of Scotland, which is why it constantly has to play catch-up.
We have had an interesting debate about fiscal decentralisation.
Stewart Hosie
I am intrigued by the hon. Lady’s introductory remarks. They bear no relation to the amendments, but that should not surprise us.
There is indeed a very serious matter at stake. We have tabled an amendment to devolve the aggregates levy, which is a recommendation by the Select Committee on Scottish Affairs and by Calman, and will make the Bill better. If we can divide the Committees, will Labour join us?
Ann McKechin
We certainly support the principle of devolving the aggregates levy, but I wish to make sure that when we scrutinise the Bill we do so in the interests of the people of Scotland. There is genuine concern about court proceedings—interestingly, the hon. Gentleman failed to mention the comments by the British Aggregates Association in the report on the legislative consent motion, which said that it was sure that it was going to win the court case. Well, we will just have to see when that case comes to court. However, I would not want a Scottish Administration to be responsible for the risks that may result from a loss in that case, because that would not be in the interests of the Scottish taxpayer.
The report by the Holyrood Committee offers an exceptional exposition of the contentious remarks made over a number of years by the Scottish Government about why fiscal decentralisation would be to the benefit of the Scottish economy. We support the measures in the Bill, because we believe that they will make the Scottish Government and Scottish Parliament more accountable to the taxpayer. They already benefit from uniquely broad spending powers, and the Bill rightly makes that power more accountable to the electorate. However, as the Committee knows, the Scottish Government argued prior to the establishment of the Committee at Holyrood that full fiscal decentralisation would grow the Scottish economy by an extra 1% per year. I refer hon. Members to paragraph 37 of that report, which states that
“the First Minister’s claim—of an additional 1% growth per year—is an exaggerated version of what Professors Hughes Hallett and Scott have stated in their research.”
The Committee concluded that the evidential base for the statements made by Professors Hughes Hallett and Scott was, in its words, “remarkably weak” and that claims did not stand up to scrutiny. The Scottish Government did not provide any detail in the legislative consent motion.
Ann McKechin
My hon. Friend raises a pertinent point and one which even those who have argued for fiscal decentralisation admitted in Committee, including Ben Thomson from Reform Scotland, who had been a firm advocate of that policy. It was stated that all the evidence showed that it is the powers that are available and how they are used, and factors that are not purely fiscal, such as technological progress, investment in human capital and policies on education, that largely determine economic growth. Many of those powers are already with the Scottish Government.
Stewart Hosie
The hon. Lady asserted that no information had been provided. The Scottish Government provided an extraordinary amount of information, much of it at the request of the Scottish Affairs Committee, and all of which, I understand, is in the annex to the full report that it published, so that assertion was wrong.
Ann McKechin
The hon. Gentleman did not refer to any of that evidence in support of his amendments. He also did not refer—why would he; it would be too embarrassing—to the purpose of the national conversation, which the Scottish Government instructed, and the many position papers that civil servants were struggling to produce and make sense of, at considerable cost to the Scottish taxpayer at a time when the resources could have been much better used.
The hon. Gentleman provided us with no independent evidence or statistics showing how, if fuel duty is devolved to the Scottish Parliament, it will result in a benefit to the taxpayer. The matter is urgent and we require immediate action. That is why we have called on the Chancellor to reverse the Tory-led Government’s VAT rise immediately and to suspend the fuel duty rise due in April. That would provide immediate relief to taxpayers and to drivers right across Scotland. That is the best way we can help people with motoring costs now.
The Calman commission recommended that the power on aggregates be devolved. We support that principle. The Government have indicated their intention to devolve it, presumably on the assumption that the court case will be decided in the Government’s favour. I would welcome the Minister’s comments when he replies, to confirm that that is still the Government’s intention.
It would be helpful to the Committee to understand what progress has been made on the Government’s review of air passenger duty, when they think that review will be complete, when they expect to be able to devolve the tax and whether they still wish to maintain the scheduled date of 2015.
New clause 17 relates to corporation tax, which the Scottish Government have been talking about for a considerable time. The pertinent questions that we all must consider carefully are what exactly does the SNP wish to do with the proposed power, where does it see the revenue gain coming from, and on what evidence is that based. Do we follow the Irish example of having a super-low rate, or do we follow the view of the SNP in Edinburgh and have retail business levy proposals, which were very badly thought out and arbitrarily proposed without consultation? Are we a high-tax or low-tax nation? Do we believe in high-quality, good value public services, or do we want to have a lower public expenditure base?
Some people believe that Ireland is an exact example for Scotland, but I argue that it certainly is not. Sadly, we no longer have the arc of prosperity argument from the Scottish Government. Nevertheless, it is important to note that when Ireland introduced its policy it was in a very weak economic position and the loss of revenue was relatively small, but that would not be the case for Scotland, which has a well-developed economy. If corporation tax is devolved, EU state rules require that the devolved Administration must not be protected from the revenue consequences of their decision.
It is clear that cutting corporation tax rates will cut revenue, at a minimum for some years, as suggested in the Exchequer evidence to the Holyrood Committee:
“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”
The hon. Member for Dundee East (Stewart Hosie) has not specified what figure his party proposes for corporation tax, what loss to the Exchequer will result and when his party believes it will recoup the loss. No one in Scotland will want us to vote on the issue until we have the pertinent answers.
The CBI and other business organisations have firmly stated that they are against differential rates within the UK. Many of the experts who gave evidence to the Committee in Holyrood noted that it would create economic distortions—the brass-plating of booking profits through Scotland by manipulating transfer pricing. I refer Members to paragraph 54 of the Holyrood Committee’s report, which states:
“The Committee does not believe that Scotland should seek to maximise its tax income by becoming a tax haven for companies operating elsewhere in the UK.”
I entirely agree with that approach.
Some evidence was given regarding the example of Switzerland, which has a highly federalised and separate tax system in its various cantons, but the Swiss example points out that that would tend to lead to lower public expenditure. Is this what the SNP proposes for Scotland? The people of Scotland need to know whether the answer is yes or no. Paragraph 494 of the Committee’s report states that Professor Anton Muscatelli noted that the Swiss example is one where there has been
“a shift from corporate taxation to personal income taxation.”
He also pointed out that that is a volatile tax.
Hon. Members will be aware of that volatility, which occurred after the 2007 fiscal crisis. The major payers of corporation tax in this country are our banks and financial institutions. They took a huge hit in 2007-08 and onwards. The cost for the Scottish public amounted to £10,000 for every man, women and child in Scotland. Where would those funds have come from if the Scottish Government had had to bear the entire cost? Is the SNP willing to allow Scottish public finances to take that level of risk? Is it saying that it wishes to see a cut in taxes on banks? Yes or no? We have had no answer to that either. Labour has argued that the banks are not paying an appropriate share towards deficit reduction in this country and has again called today for the bank levy to be increased in the Budget.
In paragraph 505 of the Holyrood report, Professor Iain McLean, whom the hon. Member for Dundee East quoted, points out that the Northern Ireland experience between 1920 and 1972, when corporation tax was devolved, was marked by widespread tax avoidance.
Many similar questions need to be asked, but at the end of the day the SNP has failed to say what it wants to do with the tax, what kind of tax regime it wants in Scotland and what it proposes in relation to bank taxes: is it for lower or higher taxes? Today, there has been the sound of deafening silence.
I have a number of questions to ask the Government about clause 24 itself. They have still to respond in detail to the Holyrood Committee’s report, and given the timing of next week’s Budget I am sure the Exchequer Secretary has many other things in his basket. Does he not agree that, given the considerable number of points that the report raises, we can anticipate at least some substantive amendments from the Government? If so, does he agree that, to ensure the maximum amount of democratic scrutiny, they should be tabled prior to Report, not simply left until the Bill arrives in the House of Lords?
Last week, the Government announced a consultation on the so-called Cadder clauses, which, as the Exchequer Secretary is aware, were not part of the original Calman commission. That consultation will continue until mid-May. Does he not agree again that it would be better to postpone Report until it is complete in order to allow us properly to scrutinise in the Commons this important legislative and constitutional reform?
Stewart Hosie
Let me respond briefly to some of the key points raised. The hon. Member for Dumfries and Galloway (Mr Brown) talked about a fuel duty regulator, as he has done on a number of occasions. He knows very well the difficulties faced by hauliers and others in the south-west of Scotland. He asked whether I would give up on the proposal in this place if it were delivered in Scotland. I said in my speech that if the UK Government would not deliver it, the powers should be devolved, so that the Scottish Government could act. I simply want fair play on fuel. It is important that the power should be devolved, so that the Scottish Government can act if the UK Government will not.
The hon. Member for East Lothian (Fiona O'Donnell) made an interesting speech, as she always does. She valiantly tried to defend the lack of Labour attempts to strengthen the Bill. She spoke in favour of Calman, but rejected one of the key Calman recommendations, which was the aggregates levy proposal. The hon. Member for Glasgow North (Ann McKechin) also made an interesting speech. She raised the notion of—I think—a £600 million loss every year if there was a 10p cut in corporation tax. No one has ever suggested an immediate 10p cut in corporation tax. That was a straw man, set up to be knocked down, and bears no relation to the policy of any party in this House.
Ann McKechin
Perhaps the hon. Gentleman could clarify what rate of corporation tax he would propose if the power was devolved.
Stewart Hosie
I would like it cut over a number of years, taking the benefit of the announcement effect and taking advantage of the experience of other countries, where, with modest changes on a downward spiral in corporation tax, the business tax yield has increased. That is very sensible and is, I think, what the current Government have in mind.
Let me turn briefly to what the Minister said. He said that the proposal would provide around one third of Scotland’s budget. That is similar to the figure of 35% proposed by the Calman commission, but that included all the revenue proposed by Calman, much of which is not in the Scotland Bill. That figure was also calculated on a baseline that excluded capital expenditure from the Scottish budget. The Minister will find that the actual percentage share is considerably lower. He said that the Government would never seek to devolve taxes on a whim. Let me assure him that we would certainly not want to do that either. We would want to devolve taxes only to provide balance and a basket of taxes to mitigate any volatility, which may well arise when the bulk of our assigned revenue comes from a single, personal tax.
I am not convinced by many of the arguments I have heard. There is a very strong case indeed for trying to push forward with the Calman proposals, particularly on the aggregates levy, so I intend to divide the Committee on amendment 58, but for now I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 58, page 16, line 17, at end insert—
‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on quarrying or mining,’.—(Stewart Hosie.)
Question put, That the amendment be made.
Ann McKechin
No, I can assure the hon. Gentleman that I do not want to burden the taxpayer unnecessarily with additional questions and pieces of paper and that I think the residency basis is the simplest way to deal with this issue. The problem is that we have a floating definition of a UK resident taxpayer, and from that we are trying to define in very exact terms a Scottish resident taxpayer. That is the point at which there could be challenges, and sometimes mischief in that people might try to change their declaration of where they believe they are resident.
This situation is unlikely to arise for the vast majority of taxpayers in Scotland; most of them will be faced with a very simple exercise. Nevertheless, as I have pointed out, in other jurisdictions with devolved income tax there are ways in which people have to declare where their residence is that we currently do not have in the UK. I want the Minister to say whether the Government are aware of any potential problems, and what measures they intend to put in place to avoid them, so that the maximum level of tax that is due is collected and returned to the Scottish Government, and so that administration is kept to a minimum. All hon. Members will be concerned about the cost to the Exchequer, and also about the costs to individual businesses. That is why I am asking these questions, but I agree that residency is the easiest way to define who should be liable to tax.
I also appreciate that a decision has been taken not to include interest on dividends and on savings. People will comment that that perhaps creates a degree of unfairness because some individuals get the majority of their income from those sources, but I acknowledge that there are complex and expensive practical difficulties in applying a residency test for those types of revenue, and that ultimately the benefit may not be great. We therefore understand why the Government have phrased the clauses in this way, but the devil is in the detail of defining exactly what they will mean in practice.
Stewart Hosie
The hon. Lady will understand that there is a very close relationship, particularly at the lower levels of income, between dividends and savings income, income tax and, as importantly, income tax allowances and thresholds. We have not tabled amendments on this topic, and it is extremely complicated, but if it were proved that there is an inherent logic in bringing together income tax, the tax on savings and dividend income, and how that relates to thresholds, allowances and the Scottish rate, might the hon. Lady and her colleagues be prepared to listen to that argument in future?
Ann McKechin
I welcome the clauses relating to borrowing powers. We agree that they make sense in terms of both short-term revenue and capital.
In paragraph 597 of its report, the Holyrood Committee accepted that
“Given its responsibility for macroeconomic management”,
the United Kingdom Government
“has a proper interest in the flow of borrowing”.
We agree with that. However, there is a worthwhile discussion in the report about evidence from the Government and other experts relating to the overall level of borrowing, both short-term and on the capital account, and we think that the Government should consider the Committee’s arguments. It did not identify an alternative figure, but made some suggestions that we think worthy of consideration. I ask the Government to confirm that they will examine the report in detail, and will take the earliest opportunity to present their assessment to the House of Commons or the House of Lords. I note that the Scottish Government will be able to borrow from commercial lenders as well as from the National Loans Fund, and I welcome that as well.
The hon. Member for Dundee East (Stewart Hosie) should be careful. I assume that his are primarily probing amendments, and I think it right to test some of the issues discussed in the Holyrood Committee, but as well as looking for the benefits, he must accept the responsibilities of the Scottish Government for overall public sector borrowing limits. Although we may disagree with the Government on what those limits should be and on the scale of the deficit reduction, we accept that as an important criterion in the debate.
Stewart Hosie
I am sure that the hon. Lady will want to be generous and accept that I made it clear on two occasions that affordability and sustainability must be taken into consideration. No one wants to do anything silly with the public finances.
Ann McKechin
That marks a first. I cannot recall the Scottish Government asking for less money. I seem to remember that when Labour was in government, they kept asking for more money and saying that they did not have enough.
The hon. Gentleman made a comment about the deficit. Before 2007 it was about 2%, which was perfectly manageable within the fiscal settlement. The increase in the deficit was primarily caused by the banking crisis, which was an international crisis as the hon. Gentleman accepts, and by the fact that we stimulated the economy, which he also accepts, although he said we should have stimulated it even more. He cannot have his Dundee cake and eat it, however. He either accepts one interpretation of what happened, or he accepts the interpretation of the coalition Government, which we believe to be false.
The hon. Gentleman raised a number of queries about the Holyrood Committee recommendations, particularly in respect of the requirement that the first £120 million of any tax shortfall must be met by spending reductions in the year in question. It would be helpful if the Minister could explain the rationale for imposing that. I think that measure is in the Command Paper—it is not in the Bill itself, of course. This issue is of particular concern in the light of the Government’s decision to abolish the end-of-year flexibility scheme at very short notice this year, which will cost the Scottish budget an estimated £23 million.
When the Minister gave evidence to the LCM Committee, he drew a distinction in respect of end-of-year finance arrangements, but at no point did he intimate that the Government or Chief Secretary to the Treasury had decided that they would be gobbling up the £23 million as part of the deficit reduction plan. That raises concerns about the nature of the relationship between the UK Government and the Scottish Government in the so-called respect agenda. Will the Minister confirm at what point this issue was raised with the Joint Ministerial Committee and the Scottish Government? Why was no mention made of this when he and the Chief Secretary were giving evidence to the LCM Committee? Again, this is about trust and the maintaining of good governmental relationships. As I have mentioned before, it is key that that is maintained to the highest degree in these clauses.
There have been issues to do with the Government’s criterion of setting a limit of £2.2 billion for capital expenditure. There are some very good suggestions in the Committee’s report about increasing borrowing capacity, which we think are worthy of consideration.
Finally, as the Minister will be aware, my colleagues in the Scottish Parliament have called for the borrowing powers to be brought forward from the proposed implementation date of April 2013 to April 2012. Given that we anticipate that this legislation will be on the statute book by the end of this year and before the next financial year, I can see no good reason why the power cannot be advanced to April 2012, which, as the Minister will be aware, is within the current comprehensive spending review period. That would assist the Scottish Government —of whatever political hue—in making appropriate planning decisions after the election. If the Minister could give an early indication that the Government are minded to bring forward the introduction of this power to 2012, that would be widely welcomed. I therefore hope he can give the Committee one positive piece of news tonight.
Mr Gauke
I propose to deal with amendments 51 to 57 first, and I recognise that, as has been said, they partly overlap with the report from the Scotland Bill Committee in the Scottish Parliament. As my right hon. Friend the Secretary of State for Scotland set out last week, the UK Government will consider the recommendations in the Committee’s report thoroughly, alongside an assessment of the impact on the UK fiscal position.
The purpose of amendment 51 is twofold. First, it would remove the requirement for Scottish Ministers to access revenue borrowing to meet current expenditure only in accordance with rules determined by the Treasury. Secondly, it would allow such borrowing to be accessed due to a shortfall in outturn receipts against forecast receipts from devolved taxes and the Scottish rate of income tax. I will deal with each of those in turn.
On the need for borrowing by Scottish Ministers to comply with rules determined by the Treasury, I note that the report from the Scotland Bill Committee in the Scottish Parliament—where the Scottish Government voted with the motion—recognised the need for the UK Government to constrain the borrowing powers. I am delighted that there appears to be a consensus in the Committee that nobody wants to do anything silly with the public finances, as one could have been forgiven for thinking that that has not been the case over recent years.
There are important reasons for Scottish Ministers to comply with Treasury rules on borrowing. The Bill’s new borrowing powers will sit within the UK fiscal framework as a whole; interest on Scottish borrowing will be included in the total UK public sector borrowing aggregates. As overall macro-economic policy will continue to be a reserved matter, it is necessary for the UK Government to set controls and limits on the borrowing powers in order to retain overall control of UK borrowing, protect overall economic stability and minimise fiscal risks to the UK Exchequer. This Government believe that the specific terms and conditions set out in the Bill and the Command Paper strike the right balance between protecting overall levels of UK debt and increasing the financial accountability of the Scottish Parliament.
On the second point, I wish to thank hon. Members for bringing an important discrepancy to the attention of the Committee. Although the Command Paper was clear that revenue borrowing would be used to meet current expenditure because of a shortfall in receipts compared with forecast in devolved taxes and the Scottish rate of income tax, the Bill was not so clear. The Government will therefore introduce their own minor and technical amendment on Report to include the Scottish rate of income tax alongside devolved taxes. In conclusion, given the continued control by the Government over the UK fiscal mandate and the fact the Government will be introducing their own amendment in respect of the second issue, I ask the hon. Member for Dundee East (Stewart Hosie) to withdraw the amendment.